Sentiment continues to drive the pair that recovered ground over Asian hours amid Nikkei adding over a 3.0% on the day, putting safe havens dollar and yen under pressure across the board. The pair advanced up to 1.3850 with the European opening, albeit another round of weak inflation readings in the EU has halted the advance. EU CPI yearly basis came out at 0.5% as expected, its lowest level since November 2009, adding pressure on the ECB now expected to act on next May meeting.
The ongoing crisis in Ukraine escalated over these last few days, and news fr om the region are pretty confusing. Despite market has been mostly ignoring it, its an increasing risk factor for the FX market, and risk aversion runs should not be dismissed so easily in the days to come.
Technically, the EUR/USD 4 hour chart shows price now retracing back to its 20 SMA that maintains a bearish slope, while indicators failed around their midlines and turn slightly south, giving little support to an upward continuation. Immediate support comes around the 1.3810 area, and if below, the pair may attempt to retest the 1.3780/90 area, while only below this last bears will win the intraday battle and be able to push it further down, towards 1.3720/30 price zone.
On the other hand, a price acceleration above daily high should lead to a continued advance up to 1.3890, wh ere the pair will finally fill the weekly opening gap.